RESIDENTIONAL ECONOMIC ISSUES AND TRENDS FORUM

May 13, 2020 | 12 PM– 1 PM Eastern Time

GDP Collapse in 2020 after a decade of growth

-3

-2

-1

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

???

GDP Details in 2020 Q1

2020 Q1 % change annualized rate

GDP -4.8%

Consumer Spending -8%

Business Spending -9%

Residential Investment(Home building, home sales, remodeling)

+21%

Commercial Structure Completion -7%

Federal and State Government Spending on Investment

Modestly Positive

Personal Income +2%

Personal Savings +152%

Spending Growth at Grocery Shops versus Restaurants

-30

-20

-10

0

10

20

30

40

2019 -Jan

2019 -Feb

2019 -Mar

2019 -Apr

2019 -May

2019 -Jun

2019 -Jul

2019 -Aug

2019 -Sep

2019 -Oct

2019 -Nov

2019 -Dec

2020 -Jan

2020 -Feb

2020 -Mar

% change from one year ago

Consumer Retail Spending in March% change from one year ago to

March

Building Material and Gardening

+10.4%

Clothing Stores -52.5%

Sporting and Hobby Stores -23.8%

Department Stores -24.5%

Non-Store Purchase +15.5%

Total Cases: Unemployment Insurance Filers(26 million estimated due to data lag)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Jan 42020

Jan 112020

Jan 182020

Jan 252020

Feb 12020

Feb 82020

Feb 152020

Feb 222020

Feb 292020

Mar 72020

Mar 142020

Mar 212020

Mar 282020

Apr 42020

Apr 112020

Apr 182020

Apr 252020

May 22920

New Cases: Unemployment Insurance Filers: (33 million cumulative since Lockdown)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Jan 42020

Jan 112020

Jan 182020

Jan 252020

Feb 12020

Feb 82020

Feb 152020

Feb 222020

Feb 292020

Mar 72020

Mar 142020

Mar 212020

Mar 282020

Apr 42020

Apr 112020

Apr 182020

Apr 252020

May 22020

Maryland: New Cases Increasedbecause of New Website for Independent Contractors

0

20000

40000

60000

80000

100000

120000

140000

Jan 42020

Jan 112020

Jan 182020

Jan 252020

Feb 12020

Feb 82020

Feb 152020

Feb 222020

Feb 292020

Mar 72020

Mar14

2020

Mar21

2020

Mar28

2020

Apr 42020

Apr 112020

Apr 182020

Apr 252020

May 22020

Pre-Pandemic: Unemployment Insurance Filers:

In 2019 … 218,000 new filers each week … 11.3 million new first-time unemployment filers

In 2019 … Yet, over 2 million net new job creations

20.5 M jobs lost in April 2020; one in three jobs lost were in leisure/hospitality

-3.3-50

-254-262

-362.8-584.1-975-980

-1267-1330

-2106.9-2128

-2544-7653

UtilitiesMining and Logging EmploymentInformationFinancial ActivitiesWholesale TradeTransportation and WarehousingConstructionGovernmentOther ServicesManufacturingRetail TradeProfessional and Business ServicesEducation and HealthLeisure and Hospitality

Nonfarm Payroll Jobs Lost in April 2020 (‘000)

ce: BLS

Unemployment insurance benefits don’t fully replace wages in some states

Local Disaster Events: Katrina and 9-11Unemployment Rates

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New Orleans

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NYC Metro

Federal Reserve All-InQuantitative Easing including buying Corporate Debts

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Fed Funds Rate

No Inflation … No Worries for Now

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CPI Inflation

Oil Price Collapse … Global Economic Collapse … Russia and Saudi Oil War

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West Texas

Beef Price Rising … Cattle Price Falling

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1.1

2019 -Jan

2019 -Feb

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2019 -Nov

2019 -Dec

2020 -Jan

2020 -Feb

2020 -Mar

2020 -Apr

Index

Home Price NAR Median Home Price … 8% higher from a year ago

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,00020

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InventoryLow Pre-Pandemic … Lower During Pandemic

4,500,0004,000,0003,500,0003,000,0002,500,0002,000,0001,500,0001,000,000

500,0000

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Home Sales Strong Pre-Pandemic

4000

4500

5000

5500

6000

6500

7000

7500

8000

8500

9000

2000 -Jan

2001 -Jan

2002 -Jan

2003 -Jan

2004 -Jan

2005 -Jan

2006 -Jan

2007 -Jan

2008 -Jan

2009 -Jan

2010 -Jan

2011 -Jan

2012 -Jan

2013 -Jan

2014 -Jan

2015 -Jan

2016 -Jan

2017 -Jan

2018 -Jan

2019 -Jan

2020 -Jan

60% of Buyers and 90% of Sellers believe Stable Price

Pending Contracts … March Pandemic Impact shaves 20%and Likely in April and in May

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60

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120

2019 -Jan

2019 -Feb

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2019 -Apr

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2019 -Jun

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2019 -Nov

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2020 -Jan

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2020 -Mar

2020 -Apr

2020 -May

Key Indicator will be Days on MarketIf Swift then Need More Listings to Satisfy DemandIf Lingering then Trouble with Demand

0

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30

40

50

60

2019 -Jan

2019 -Feb

2019 -Mar

2019 -Apr

2019 -May

2019 -Jun

2019 -Jul

2019 -Aug

2019 -Sep

2019 -Oct

2019 -Nov

2019 -Dec

2020 -Jan

2020 -Feb

2020 -Mar

Mortgage Application to Buy a Home… Worst is Over?

-40

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-20

-10

0

10

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30

Jan 32020

Jan 102020

Jan 172020

Jan 242020

Jan 312020

Feb 72020

Feb 142020

Feb 212020

Feb 282020

Mar 62020

Mar 132020

Mar 202020

Mar 272020

Apr 32020

Apr 102020

Apr 172020

Apr 242020

April Housing Market Indicators

% change from a year ago

Pending Down 25% to 30% in Midwest and SouthDown 45% to 55% in Northeast and West

Inventory Down 40% to 45%

Days on Market 25 to 30 days

Time to Close 33 days to 40 days

States faring better GA, TX, UT

States faring worse CA, NY, MI, PA

1930s Great Depression versus 2020 Pandemic

1930s 2020

Unemployment Rate 25% 20% (?)

Job Losses Steady downward for 5 years

Abrupt downwardfor 5 months (?)

Government Spending ContractedTo Balance Budget

Expands To Provide Income

Monetary Policy Contracted Loosened to Max

30-Year Mortgage Rate can fall Further …Because of Super-low 10-year Treasury Yields …But Jumbo Loans not Working

0.01.02.03.04.05.06.07.08.09.0

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Housing Shortage …Falling Below Normal Again during Pandemic

0

500

1000

1500

2000

2500

2000 -Jan

2001 -Jan

2002 -Jan

2003 -Jan

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2006 -Jan

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2017 -Jan

2018 -Jan

2019 -Jan

2020 -Jan

In thousand units

Federal Budget Deficit … $4 trillion in 2020 … Who will buy U.S. debt?

-4500000

-4000000

-3500000

-3000000

-2500000

-2000000

-1500000

-1000000

-500000

0

500000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1970 High Inflation pushed up Mortgage Rates

0.5

2.5

4.5

6.5

8.5

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14.5

16.5

18.5

20.5

1971 -Jan

1974 -Jan

1977 -Jan

1980 -Jan

1983 -Jan

1986 -Jan

1989 -Jan

1992 -Jan

1995 -Jan

1998 -Jan

2001 -Jan

2004 -Jan

2007 -Jan

2010 -Jan

2013 -Jan

2016 -Jan

2019 -Jan

2025 to 2030 … Delayed Inflation

Future Possibilities

Inflation Rate 4% to 7%

Mortgage Rate 6% to 9%

Home Sales Negative

Homeownership Rate 62%

Home Price Appreciation 5% to 10%

College Tuition, Medical Expenses Rising

Income, Rent, Food Rising

Mortgage Payment for Those who bought in 2020-21

Not Rising

OUTLOOK 2020-2021

2020 Quarterly Forecast

Annualized Rate Year over year change

2018 5.34 million

2019 5.34 million

2020 Q1 actual 5.48 million +5%

2020 Q2 3.2 million -39%

2020 Q3 4.7 million -13%

2020 Q4 5.1 million -6%

Annual Forecast

2019 2020Forecast

2021Forecast

GDP Growth 2.3% -4.5% +3%

Job Gains 2.2 million - 4 million + 2 million

Home Prices 4.8% 0% to 2% 1% to 3%

Home Sales 0% -10% to -15% +13 to +18%

Empty Malls into Healthcare Armory?

Permanent Changes after PandemicEnd of Open-Houses

Virtual House Tours

Virtual Office Meetings

More Remote Working

Less Traffic near City Centers

Move Further Out

Larger House

Advancement of Civilization People have enough to eateven in times of natural disasters

People starve even in normal times